President Obama has promised to let the Bush tax cuts expire for households making more than $250,000 a year. It's a precarious pledge. On the one hand, raising taxes in the teeth of a tough recovery could stifle private sector hiring and hurt aggregate demand. On the other hand, Obama's plan would shave an estimated $700 billion off the debt, at a time when deficit concerns are dominating the debate over the economy.
There are no easy answers on how to juice the economy while soaking up the deficit. Unless you're a Republican senator, in which case there is one very, very easy answer: cut taxes and everything will work itself out. Here's Arizona Republican Sen. Jon Kyl on the magical power of tax cuts (via ThinkProgress):
WALLACE: We're running out of time, so how are you going to pay $678 billion just on the tax cuts for people making more than $250,000 a year?
KYL: You should never raise taxes in order to cut taxes. Surely Congress has the authority and it would be right, if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending. And that's what Republicans object to. But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans.
The statement "You should never raise taxes in order to cut taxes," is masterful in its internal logic. Raising taxes to cut taxes ... how paradoxical, and absurd!
But tax cuts don't pay for themselves. Renewing the entire 2001/03 tax cut will add more than $3 trillion to our debt/ Obama's plan would shave off about $700 billion. So if you're a true deficit hawk suggesting alternatives, you've got a few choices. You can start looking for $700 billion in offsets from spending cuts, tax increases, or tax expenditure cuts. Or you can implicitly acknowledge that you were never really serious about that deficit thing anyway. But Republicans' intellectual slavishness to tax cuts as the Alpha and Omega of public policy is just exhausting and sad at this point.